I first asked Bill how he initially got involved in the procurement market -- as well as what he's currently doing at TPI. Bill told Spend Matters that he's been a lifelong procurement professional. His first job in the area was expediting Intel 8086 chips in the defense industry. He eventually worked his way up within the high-tech manufacturing supply chain and then transitioned over to financial services with American Express in the 90's. Then he became CPO at Wachovia, but on his way he served Senior Vice President of Outsourcing Strategy and Governance, SVP/Head of Strategic Sourcing and VP/Head of IT Sourcing, among other roles. After success on the CPO level, Bill eventually landed at TPI when he was looking for his next challenge. In his current rule, Bill has observed a doubling of activity levels in the procurement space in recent years. However, more has changed than just volume levels.
I next asked Bill about the procurement BPO market and what's changed since its inception. Bill replied that Deustche Bank (editors note: which I had specifically asked him about) was one of the early big deals done with Accenture that was "certainly mixed" like a lot of early deals. In Bill's words, "it was sold at a very strategic level and it probably tried to accomplish too much, too fast." No doubt, management "probably underestimated the amount of change management required to be effective." And "as a result it had its challenges."
Another one of the larger earlier deals was UTC's relationship with IBM (resulting in a bespoke eProcurement system, among other things, which your trusty editor had the chance to do an audit of earlier in his career). Bill notes that with these early deals in general, "as you would expect, with a lot of the initial forays into the market, there was a lot of learning that took place. There were a lot of practical implications that were difficult." And business models have not come without their own challenges along the way, as Bill observes. "Gain share has proved challenging. No doubt it's best to see service providers incented, but how do you agree on attribution for savings? Writing checks gets a lot of visibility and can become problematic. If you overly incent any party to savings, other things will suffer. The key is you need to achieve real objectives on the stuff you're buying and price is just one element."
What's one of the biggest challenges with procurement and procurement BPO today? No doubt it's on the supplier performance management (SPM) side of the system. Bill suggests in this regard that "a system alone won't solve this. There is no way for that system to get populated with relevant and timely performance data unless people do it. Systems can be good if they're integrated; reporting can be helpful. But ultimately if you're talking about putting in data around SPM, there has to be someone measuring performance and entering it. Only a subset can be entered in automatically. The challenge companies have is that vendor management is typically fragmented -- and only part of it is within procurement." Even in the best of cases, "the center-led organization must enforce discipline and good SPM hygiene, but execution must occur at the edges anywhere." And as we all know, with a third-party involved sitting in between corporate and the decentralized buying and supplier management elements of the organization, there's opportunity for further challenges to rear their ugly spend heads.
Stay tuned as our discussion with TPI's Bill Huber continues.